Trump’s MFN: So Why Pharmaceuticals?
Three important facts that one must understand when evaluating U.S. versus ex-U.S. drug pricing:
The U.S. has the highest rate of national health spending relative to other high-income OECD (Organization for Economic Co-operation and Development) countries; almost two-fold higher than the U.K. or Australia.
U.S. pharmaceutical spending as a percent of total health spending is one of the lowest versus other GDP-like countries; lower than Australia, Germany, Canada, Japan, Italy, Korea, Russia, and even Mexico and only slightly higher than the U.K and France.
Therefore, it should not be surprising to know that the gap between U.S. and OECD countries on other health expenditures such as hospital care, ambulatory visits, physician fees, ER visits, surgical procedures, medical surgical supplies etc., which in the U.S. account for ~89% of total health care spending, far exceeds the gap between U.S. and OECD pharmaceutical costs.
So, why has the Trump administration singled out pharmaceuticals for potential price controls tied to the lowest prices seen in other developed countries? Why does this administration, as well as many past presidential administrations, decide to focus on a component of U.S. healthcare spending that accounts for roughly 11% of total healthcare spending and most of the meaningful new patient innovations that we have seen in healthcare while continuing to ignore those components of the healthcare system that account for 89% of total spending? Why doesn’t the administration understand that pharmaceutical pricing is closely tied to the level of innovation a new medicine provides and the associated degree of cost offsets avoided through the use of the new and innovative medicine (ie., the cost of needless hospital days, ambulatory visits, physician fees, ER visits, surgical procedures, patient lives, or years saved, etc.)? And why doesn’t the Trump administration understand that since the cost of these offsets is significantly lower in other countries than the gap in pharmaceuticals that you cannot expect these countries to pay the same drug price seen in the U.S. where the incremental cost of these offsets is significantly higher than the differential in U.S. to OECD drug pricing?
We will not make progress in lower U.S. healthcare costs and saving Medicare and Medicaid for future generations if we continue down this misguided political pathway and don’t focus on the types of spending that account for 89% of total U.S. healthcare expenditures.
You can find the original LinkedIn post here.